Why Wall Street and tech analysts got the iPhone 5S wrong

Financial analysts, tech industry watchers and even a few media outlets struck out on initial iPhone 5S and iOS 7 predictions. Why didn't they see the record-breaking sales coming?

This kind of feature-focused thinking isn't new to Apple. Three months ago at Apple's WWDC in San Francisco, analysts were less than thrilled with iOS 7 for its lack of innovation. They claimed that iOS 7 shamelessly took features from Windows Phone and Android, which it did.

But that's the problem with this definition of innovation, a term attached to ground-breaking features-it's got little to do with Apple's success.

In truth, Apple has never really innovated. From the iPod to the iPad, Apple products were built upon existing ones. Apple has also never been just about features, in spite of Steve Jobs' famous, "one more thing" line. Rather, Apple creates and sells fluid, delightful customer experiences.

Taken together, the iOS 7 software and iPhone 5S hardware deliver such an experience.

"One of Steve Jobs' first inspirations was around Japanese packaging, the art of gift-giving and gift-wrapping, where the experience of opening the box is as important as what's in the box," explains Andrew Borg, research director at Aberdeen Group.

"Being able to embody that in a software experience is where innovation comes in," Borg says. "Maybe 'innovation' is the wrong word, because we're talking about something that's as old as ancient cultures."

Just compare Android phones to iPhones, Borg says. "If you look at Android on a Samsung or HTC device, you'll see islands of innovation in a sea of potential chaos. From the end user's perspective, it is not a fluid, synchronous experience."

In the final analysis, consumers don't buy innovation, they buy great experiences.